RPSM09100175 - Technical Pages: Member benefits: Overview: Payments: Other transactions regarded as payments: Limit on increase in benefits

Limit on increase in benefits

A registered pension scheme that is an occupational pension scheme is treated as making an unauthorised member payment where

• at any time during a pension input period in respect of

• • a cash balance arrangement or
  • defined benefits arrangement or
  • a hybrid arrangement that includes the provision of cash balance benefits or defined benefits

• the member and a sponsoring employer are connected or the member is connected with a person who is connected to a sponsoring employer, and
• the pension input amount in respect of the pension input period for the arrangement in question exceeds the ‘notional unconnected person input amount’ in respect of the pension input period for the arrangement in question.

For this purpose, the pension input amount for the member is calculated in accordance with RPSM06101020 to RPSM06101070 for cash balance arrangements and RPSM06103010 to RPSM06103070 for defined benefits arrangements. In the case of hybrid arrangements, the pension input amount is calculated in accordance with RPSM06104010 to RPSM06104030. However this particular calculation is carried out as it ‘pension input amount B’ was omitted from the calculation (see RPSM06104030).

The ‘notional unconnected person input amount’ for this purpose is the amount of the pension input amount would have been for the pension input period in question if, at no time during that input period, the member was not connected with a sponsoring employer or a person connected with a sponsoring employer.

The amount of the deemed unauthorised payment is the amount equal to the difference between the pension input amount for the member and the ‘notional unconnected person input amount’.

The unauthorised member payment is treated as being made to the member whose pension input amount exceeds the ‘notional unconnected person input amount’ (or that member’s personal representative).

A connected person is defined in section 839 of ICTA 1988.